What did you make of the Level I analysis? More will be incoming in future posts, but meanwhile, include the learnings from the topical analysis in your arsenal if you're preparing for your own Level I.

In this post, the focus shifts to the Level II 2012 results. Again, the response to the results analysis tool was great! This analysis would not have been possible without your participation, so many thanks to the readers.

Pass rates for Level II for the sample, while still higher than the overall 42% quoted by CFA Institute, is lower than the Level I sample (72%). It's better for the analysis, actually - the crucial data to be analyzed is around the pass/fail border, and between failing bands. But still interesting that the sample pass rate trends down from Level I to II, whereas the overall pass rates trend up.

Below are the breakdowns of the sample by passing grade, and by topics. As always, the graphs are interactive - mouse over each segment for more details.

CFA Level II 2012 Sample Breakdown by Grade

And here are the topics breakdown for the entire sample, the failing candidates and the passing candidates.

As expected, when comparing passing and failing candidates there is a large difference in performance across the topics. However, we see larger differences in some topics than others, which lead to some interesting key points...

FRA is A Pain.From candidate feedback and questions, Financial Reporting & Analysis has been the traditional pain point for most Level II candidates. Its difficulty seems to apply across all candidates here, as the performance improvement in FRA from failing to passing candidates is definitely there, but as significant compared to other heavy topics (see next point). This does not detract from the importance of FRA in Level II though - at 20% weighting you simply can't afford to ignore this topic.

Pay Attention to Equity Investments.Performance for the other 20% heavy-weight, Equity Investments, is a whole other story. The difference in performance between passing and failing candidates in Equity Investments is remarkable. And as one of the heaviest-weighted topics, this screams one conclusion - folks, when prepping for Level II, bang on Equity Investments like a snare drum.

Other Topics to Exploit.Similar patterns also occur with Corporate Finance and Derivatives - a significant difference comparing passing and failing candidates. One possibly explanation is that the subjects are not that hard to master, and the difference between passing and failing candidates is that passing candidates took the time to cover it throughly. It's likely. Be sure to cover these subjects thoroughly in Level II!

A note on Ethics.
Ethics is one of the topics to observe the least amount of performance improvement when comparing passing candidates to failing. This shows that candidates in general take Ethics equally seriously, no doubt at least partially due to the ethics adjustment advice given to candidates. This topic also has been covered and emphasized here in the past. But given the observations here and some preliminary further analysis (will be posted soon), perhaps Ethics as a topic, especially in Level II where it's not as heavily weighted, can be focused on too much by candidates.

Candidates do not need to pass Ethics to pass the exam. As indicated on the CFA Institute website, and proven on our analytics report, the sole requirement to pass is to score higher than the Minimum Passing Score (MPS).

That's not to say that Ethics isn't important - its ubiquity and heavy weighting across all 3 levels make it a near requirement for you to master it if you want to achieve your CFA charter. But theoretically you do not need to pass it to pass the exam.

Reference from CFA Institute FAQ:

What is the "ethics adjustment"?

The Board of Governors instituted a policy to place particular emphasis on ethics. Starting with the 1996 exams, the performance on the ethics section became a factor in the pass/fail decision for candidates whose total scores bordered the minimum passing score. The ethics adjustment can have a positive or negative impact on these candidates' final results.

CFA Institute has a policy of not releasing either the minimum passing score or individual candidate scores. Consequently, CFA Institute does not release specific information about the ethics adjustment or the candidates who were affected. The adjustment has had a net positive effect on candidate scores (and thus pass rates) in most exam sessions. The published pass rates always take into account the ethics adjustment for borderline candidates.